Estate tax planning and family limited partnerships

The general partners manage the assets contributed to the family limited partnership. Limited partners generally have no rights with respect to assets held by FLP. Lack of marketability and fractional ownership of limited partnership interests held by limited partners are two of the well-established reduction principles that decrease the value of taxable estate. The discounts allowed by restricted rights provide for a reduction in the value of the assets held by each limited partner, but also increase the amount of annual tax-free gifts that can be achieved. Today’s high marginal estate tax rates allow for the wise and prudent planning that is necessary to preserve family wealth.

Centralized Management of Family Heritage

When a corporation is used as a general partner, the general partner controls all of the assets of the partnership. This corporation may also employ family members and others. It will convene meetings, conduct training sessions and facilitate asset management. With a corporate general partner, continuity must be ensured even in the case of husband and wife.

Minimize sequences

By using an FLP, the time and expense of probate of an estate can be greatly reduced. When a living trust is also used, then there is no probate. Living wills are not a public record and therefore no one but those involved in the family know their contents.

Cure Title Flaws

The procedure for transferring assets to an FLP can help with the discovery of title defects. This can be a major problem for real estate assets if it is not discovered and corrected.

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